Warranty Deed Vs. Quitclaim Deed - Know the Difference

While both these deeds are important documents for property sale transactions, their functions and features are distinctly varied, which is why the warranty deed vs. quitclaim deed analysis given here serves to elaborate on their differences.

Quick Tip

Whichever type of deed you have, it is advisable that you conduct a title research before signing on the dotted line.

It is important that real estate transactions that include transfer of property are conducted in a legal way to avoid any problems in the future. For this, a detailed legal document called deed is essential to be prepared between the parties who are conducting the transaction. It gives the legal description of the property and the terms. A person who is transferring his interest in a real estate is called a grantor, and the one who receives it is known as grantee. Though there are many types of deeds, two of the most important deeds for real estate transactions are warranty and quitclaim deeds. Both are used for the legal transfer of property from one person to the other. Both documents have to be signed in front of witnesses for the completion of the transaction. They help protect the buyer or the grantee from third party claims for the property. Though there exist similarities, there are stark differences between the two.

About a Warranty Deed

In a warranty deed, during the transfer of the title, the grantor or the seller warrants that his ownership of the property is clear and free of any kind of liens. This deed is mostly used for traditional sales transactions.

About a Quitclaim Deed

In this deed, the grantor's ownership of the property is not explicitly mentioned or assured for that matter. It only states that the grantor will release the ownership rights and interest in the property to the grantee. This deed is not used for traditional sales transactions.

WARRANTY DEED vs. QUITCLAIM DEED

Tax Advantage

■ There are no tax advantages in this type of deed.

■ As property is transferred from one family member to the other, the transaction is treated as gift and, thus, has tax benefit.

Ownership

■ It guarantees seller's ownership of the property.

■ This does not guarantee or assure the grantor's or seller's ownership.

Warranty

■ Yes, the grantor or seller claims that he owns clear and legal title of the property.

■ No, the grantor does not warrant that he owns clear and legal title to the property.

Transfer of Title

■ The seller of the property warrants that the property he owns is free of any kind of liens, lease, and encumbrances.

■ The owner merely transfers the title of what he owns to another party.

Utilization

■ During sale of property, this deed is made use of.

■ This deed is not used during sale, rather is when the grantor is bequeathing the property after his death, adding spouse's name to title, removing spouses name after divorce, or transferring it to a revocable trust.

Legal Protection

■ The level of legal protection to the buyer is high.

■ The level of legal protection to the grantee is low.

Risk Factor

■ The transaction has a lower risk.

■ The transaction may have higher risk.

Lien

■ If there is any discrepancy in the facts mentioned in the warranty deed like change in area, name of the owner, forgotten lien, etc., the buyer may sue the former owner.

■ If there are any problems with the title or a forgotten lien on the property, there is little legal help for the grantee.

Damages

■ The buyer is entitled to get a compensation for the damages.

■ The grantee does not have any right to claim compensation

Insurance

■ Warranty deeds can be backed by title insurance.

■ Quitclaim deeds cannot be backed by title insurance.

Parties

■ The parties in this transaction have a buyer and seller relation, and may not necessarily know each other.

■ This transaction may occur between parties who are well-acquainted or even related to each other.

Significance

■ It will work well in all property sale transactions provided the property has a clear title without any obligations. Also, the owner has complete ownership of the property.

■ They work well where the property is transferred from one family member to the other, and both parties know the details of this transaction; a third party is not involved.

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Chances of Fraud

■ Chances of fraud are limited as the seller will have to compensate (you) for damages, if any clause in the deed is false.

■ There are chances that you can end up paying for a property that the seller does not own in the first place.

A person may exercise a warranty deed for some part of the property and quitclaim deed for the remaining. Whatever be the case, it is highly important that you solicit professional legal help from a real estate lawyer for conducting legal documentation and formalities involved.

Our Verdict

A warranty deed is any day preferable than the quitclaim deed, especially when you are dealing with an unknown party. The lower risk and increased legal protection will work in your favor.